PHCM9441 - Healthcare Economics and Financial Management

Assignment Task

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Question

1. a) PM Lee Hsien Loong urges young couples to “add a little dragon” to their families in his Chinese New Year message. Assuming a competitive market for OBGYN services in Singapore explain the effect (by using graphs) on equilibrium price and quantity of these services.

b) Western Australia country Health service (WACHS) has further simplified its Patient travel assistance scheme by dropping the requirement of GP’s signature on the application form. Assuming a competitive market for travel services explain the effect ( by using graphs) of this policy change on equilibrium price and quantity of travel assistance service.

c) Government is planning to provide production related financial incentives (such as subsidy to purchase raw materials) to a drug company producing fast-acting insulin. Assuming a competitive market for fast-acting insulin explain the effect ( by using graphs) of these incentives on equilibrium price and quantity of normal insulin.

d) Assuming a competitive market for Rapid Antigen Tests (RATS) explain the effect ( by using graphs) of a policy where government waives the mandatory use of N95 masks in the community on equilibrium price and quantity of RATS.

2. Provide a short definition (1-2 sentences) for each of the following concepts:

a. National Efficient Price (NEP)

b. National Efficient Cost (NEC)

c. Positive Externality

d. Adverse selection

3. Royal commission into aged care quality and safety has recommended sweeping reforms in aged care sector and it is estimated it will cost an extra $8 billion to implement these changes. Australian government is mulling to impose a tax on soft drinks to recover part of this extra burden. Australians buy 1.35 billion litres of sugarsweetened drinks per annum (2012 figures). Currently, the average price of these drinks is $1.85/litre. Assume that government wants to implement a sales tax (x% per litre) on soft drinks to reduce their sales (or demand) to 700 million litres. The price elasticity of demand for soft drinks is -1.20.

a) How much sales tax should be imposed to achieve the demand target of 700 million litres? 

b) How much additional revenue will be raised by this tax?

c) Do you agree this is a right way to reduce consumption of soft drinks?

4. The private competitive market is used to finance and provide most goods and services in Australia. Health care is an exception to this. Why should health care be an exception? Explain your answer

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